Constituted on 26 December 2018, to decide upon the appropriate level of reserves the regulator should hold. This committee has been appointed in the backdrop of a deadlock between the RBI and the Government. The government feels that RBI’s reserves exceeded its limits and that these could be used for productive purposes such as recapitalizing public sector banks.
What are RBI Reserves?
RBI holds reserves in currency and gold inorder to:
- Absorb potential losses that it may incur while holding foreign
- Shield the economy from monetary and financial
- Carry monetary burden during unstable
- Perform price and exchange
- Perform its functions independently of the government
- RBI holds 25.6 % of its assets as reserves while the global median is 16%. Under Section 47 of RBI Act, RBI transfers the excess funds to the Government after accounting for contingency reserves.